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Pablo,
Thanks for the advise for buy/sell on volatility. You are right, the IV
high-low must have a base for reference, otherwise it is meaningless. If
we can have a historical volatility of the option IV, that should
serve our purpose, right ?. Apply IV/HV will then yield the ratio, if
ratio <1, buy and if ratio is >1 sell. Is this what you use ?
Thanks for the Meta HV formula, on comparison, I realize I had it
programmed in my indicator already. It was kind of you to point out that
HV is for stock and not on option. I would have taken it for
option.
The IV indicator you mentioned is referring to the "option
volatility" in the indicator drop down menu ?
As for the Greeks, as an example, say you bought a call, its price will
rise dollar for dollar with the stock if delta is 1, if the delta is near
to zero, even if the stock gap up, you would not see any up price in
option. Such position should be disposed asap. Delta of 0.5 has the max
time value with no intrinsic value. If trade is against your direction,
for every dollar of stock decline, option will fall by 50cts. Direction
is abstract if we can forecast direction accurately, buy simple call and
put will be neat, forget about other complex strategies in options. Then
we will enjoy the leverage in options, less outlay and high % return.
However, volatility could override greeks.
Best Regards
Freddie Ng
At 11:54 PM 4/7/2003 -0300, you wrote:
I
actually didnt mention specific options soft on account your request was
related to metastock capabilities and use for options, the best options
soft is optionvue, or you can use the web service of
www.optionetics.com.
there is other site like
www.IVolatility.com
forget about the greeks in my experience they
dont add anything crucial to your trading, but volatility is crucial,
this was the reason i used the ip/hv ratio when i was still investing in
options in the american market
mostly you must buy low volatility and sell (or
write) high volatility, but the problem is high or low comparing to what,
so i started to use the ratio to spot it fast, i dont have the exact code
for the ratio with me, but you can find the iv indicator on metastock
quick indicator list and for the hv i usethis formula:
Std(Log(C/Ref(C,-1)),10)/Std(Log(C/Ref(C,-1)),100)
make notice that while the implied is
calculated based on the option price the hv is calculated on the
underlying.
about the
group/industry ranked by their
volatility, you can find in the sites mentioned by me and debra that
infomation
i never used it but optionetics is very much
discussed and recommended inoptions boards and usenet groups, but as a
rule you should check the cboe site
Bye
----- Original Message -----
From: Freddie Ng
To: Metastockusers@xxxxxxxxxxxxxxx
Sent: Sunday, April 06, 2003 10:13 PM
Subject: Re: [Metastockusers] Stock Option
Pablo,
Appreciate your valuable systematic explanation. Those points that you discussed were very important in option trading. If it can determine or anticipate the correct underlying direction, this info can then be used to interpret the option direction. Call follows underlying while Put is reverse. I also understand that not all indicators are suitable for each stock and Metastock can search and match the best indicator to optimized profit, I wonder if I had missed out anything in Metastock for option.
Volatility(implied and Historical)
Keen to know how you use these info to analyze the option. I am aware that one can lost trade due to volatility. You mentioned about use ratio of IV & HV, can you elaborate a little bit more. The option volatility indicator is for IV, how do you obtain HV in Metastock.
Btw, do you have any good source where I can obtain the volatility info. Is there any such listing of group/industry ranked by their volatility.
Best Regards
Freddie Ng
At 04:07 AM 4/5/2003 -0300, you wrote:
Freddie,
on using metastock for options you have 2 problems
1 Data problem
2 analysis problem
1 since options trade for a short period, the problem arises, you cannot
make any analysis for a while, there is 2 ways around it : continuos
contracts (i tried them for a while , but they are not reliable in my
opnion), the alternative is using intraday data, so even if you can make
analysis on daily charts for a while, at least you can run intraday an.
2 about the analysis:
you must keep an eye on the stock or whatever the option is for
then you can analyze the option itself by common tech an. tools
then you have to keep an eye on implied volaitity and hystorical volatility,
for while i used a ratio between the implied volatility and hystorical
volatility
check the quick drop indicator youll find some options indicators
Pablo
----- Original Message -----
From: "freddie_ng" <n07476@xxxxxxxxxxxxxx>
To: <Metastockusers@xxxxxxxxxxxxxxx>
Sent: Saturday, April 05, 2003 2:00 AM
Subject: [Metastockusers] Stock Option
> Hi all Metastock experts,
>
> Can anyone enlighten me how to make use of Metastock to trade on
> options. I own a Metastock ver 8.0, just recently upgraded from v7.2.
>
> Best Regards
> Freddie Ng
>
>
>
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